CLM: is it automating or implementing contract management?

Gathering data from multiple sources and making it usable is something that will drive value for any organisation. In my previous article I wrote about the positive impact robotic process automation (RPA) would have in the field of contract management. Usually I have seen RPA deployed for uses that are more on an incident level than on a fundamental approach. Therefore I was quite happy to see that consultancy firm Gartner brought out its Magic Quadrant for Contract Life Cycle Management. Because there is more to it…

Contract life cycle management (CLM) is a solution and process for managing the life cycle of contracts created and/or administered by or impacting the company. These include third-party contracts, such as outsourcing, procurement, sales, non disclosure, intellectual property, leasing,facilities management and other licensing, and agreements containing contractual obligations now and in the future.

This nice definition is not mine, it is written up by the folks at Gartner. I would also add ‘the past’, as in a lot of contracts – even after their ending – there are clauses that bind parties. Also, because it is vital to have this historical data in order for evaluation sake; to make informed decisions in the now or future.

Methodology
in CLM

However, the pivotal point in this definition is the process. I have worked for many years in all kinds of automation. For me the key success is not buying a tool, it is buying a methodology and setting up a standard. So when I look at Gartner’s latest Magic Quadrant in this area, I saw a lot of focus on tooling and limited on the implementation. In that sense the CLM market is not that different from the RPA market. Vital and cool stuff brought by amazing vendors, that however for their implementation rely on consultants and therefore make the implementation a costly thing. So, there is room for methodology in this area.

Contract management is no longer an operational thing. If there is one lesson to be learned from thecurrent corona crisis, then it is the one about managing your entire ecosystem.And, unfortunately, almost all relations in a business ecosystem are managed bycontracts. So managing a contract is of vital importance to any organisation.Recently I saw the Dutch airport Schiphol, an immense enterprise, write down intheir annual statement (p.89) that they have embarked on a strategy of managingtheir contracts based on the CATS CM® methodology. An elegant methodology thathas been developed, tested and validated by the late Jan van Beckum, Gert-JanVlasveld and recently brought to a more strategic level by Linda Tonkes. Why is the contract management method so elegant? Because of the way it addresses all elements as described by the earlier definition from Gartner, but also adds the S of ‘Scenarios’.

From tool to mindset

Jan van Beckum devised already in the early spring of 2004 that contract management is all about scenarios. Not every contact is of equal importance. Yet all contracts together amount to a massive set of obligations. However, if you are buying or selling a commodity that can easily be replaced, you will have another scenario concerning managing the relation than in case you are small yet very vital to the business. So after having read this Gartner report and having talked to quite a lot of software vendors in this space, I have come to a simple conclusion: CLM is not just about implementing a tool. It is a fundamental shift in mindset. You have to understand how to go from managing your own organisation to managing your entire ecosystem. And let’s face it, for leaders of the past hat is quite a challenge, as this is not about power and status. It is about obligations, agreements, relations and execution focus. That is why CLM is not a fool with a tool; it is leadership with the power to make a difference…

Arjen van Berkum is a columnist, keynote speaker and motivator, with an eye for innovation and disruption. He is also a visiting lecturer at among other Delft University of Technology (TU Delft).
Arjen works as Chief Operations Officer (COO) at Another Monday, an intelligent automation company, where he lives and breaths automation and artificial intelligence.

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